Sunday, November 2, 2014

Debt and Domestic Disputes

Debt is not a natural thing. We come into this world debt-free and we leave the same way. Somewhere along the way we get this idea that perpetual debt is a normal condition.

And it is interesting how our society has been built along these lines. The value of our currency is based on interest rates - how much people pay to borrow money. When we talk about the state of our economy, we don't talk about how much money we make or dividends we pay or how many assets we, as a country, own. Instead, we talk about the size of the deficit and the size of the national debt.

On a personal level, many folks view their financial health in terms of theircredit rating. Their economic health, in their minds, is directly proportional to how much they can borrow or have in fact, borrowed.

The media aids and abets this. In a recent report, the news media hyped a non-binding ballot initiative to tax millionaires an extra 3%. They use the term "millionaire" to describe anyone making more than a million dollars a year, as opposed to someone having a million dollars in the bank. From the media's point of view, you wealth is measured by your income, period. How much money you actually own (which could be nothing, even if you make a million a year!) is irrelevant to them. And indeed, the government thinks the same way. Your assets are not counted, for the most part, if you try to qualify for government assistance.

Our entire society has been hoodwinked, it seems. We are programmed to think of wealth in terms of income and not assets. And income is viewed only as a means of borrowing even more money so you can buy even more stuff.

But there is another way of thinking - and this is the "secret to wealth" that is not talked about, but that those reviled "1%'ers" know all-too-well. And that is wealth is not how much you money make but how much money you have. You can make a lot of money in this country and still be flat broke. And in fact, many Americans are - I meet people all the time who are making the "six figure salary" but have little or nothing saved for retirement, or indeed even equity in their homes. Even our politicians live this way - (even "fiscally responsible" GOP politicians!) on far more money!

The net result is that we have gotten an entire generation to trade real wealth for a collection of baubles and trinkets - much as we swindled Manhattan from the Indians. Middle-class and upper-middle-class people, who make very good money, blow it all on smart phones, cable TV, leased cars, take-out meals, maid service, lawn service, designer coffee drinks (and designer clothes), and the like - convinced that if they can buy the trappings of wealth, then they are "wealthy".

But a funny thing happens. They know, deep down, they are broke or going broke, or at best, going nowhere. And when something upsets the apple cart, such as the recession of 2009, well, they are not in a position to weather the storm. Instead of saving for a rainy day, they went out and bought more and more, so they could flaunt their apparent wealth to others. Kind of hard to feel sorry for them, of course, but I guess victimhood is the new status.

This sort of financial stress is not healthy, for your body or mind, or for relationships. The number one cause of marital difficulties is money issues. And many marriages are little more than a "race to the bottom" as I noted in one of my first postings, with each party trying to get the most out of the relationship before the inevitable breakup occurs (and then the real looting begins!).

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It is better to sit down and talk about money than to stand up and argue about it._______________________________

It is sad not only because it is so unnecessary, but because these sorts of folks will never know the joy of real love. They become bitter, angry divorcees, and regale you for hours about how horrible and rotten their ex-spouse was. And sadly, many go back to the well a second or third time, and get into yet another relationship based largely on the consumption (conspicuous, if possible) of material things.

Debt and money were probably one reason my Father was so angry most of his life (that, and the fact he was an asshole). He went off to work every day at a job that he really didn't like, to make a staggering amount of money (for a middle-class person, at the time) so we kids could go to college or get new toys and clothes or whatever. He made good money. He had a nice house. He had the makings of a nice family. But he was never happy, as he never seemed able to "get ahead" of the bills and put any amount of money aside for the future. He felt trapped in his job, and he let us know that on a regular basis. How sad.

Having a plan in place to build wealth, is essential to any relationship. Discussing finances and wealth and spending - constantly - is essential. Most couples try to avoid such discussions. They charge up a mountain of debt, and then at the end of the month try to figure out how to make the minimum payment. Even worse, many couples keep separate banking accounts and credit card accounts so that one doesn't know what the other is spending. Actually, an awful lot of people do this, which never ceases to amaze me.

It is one reason I never understand when someone says, "My spouse bought me this!" - showing off some present they received. But if you are married (or even in a relationship) the money used to buy the item in question is a communal asset (or should be). The idea that your spouse can "give" you something is akin to you giving something to yourself. It is taking money from one pocket and putting it in the other.

And yet, our society fuels this scenario. Couples live together, get married, even have children, and still split the bills and have separate bank accounts. They really aren't so much married as they are roommates. And since they don't communicate with each other about money and spending plans (and since each has their own agenda and bank account) eventually the issue comes to a head - or comes to a head over and over again. Arguments ensue, and it devolves into a he-said, she-said kind of deal. "Why did you have to waste money on that new deer stand?" she says. He retorts, "Well, look at all the money you spend on shoes you never wear!" And so forth. Divorce is the inevitable result, for about 60% of Americans, and that is just sad and unnecessary.

And perhaps one reason this is occurring is that we can afford it. In past times, simpler times, it was more of a struggle to make ends meet, to raise a family on the hourly wage from the factory. A wife didn't have the time or money to go shopping. Husbands wouldn't dream of spending the family income on "toys" for themselves - or cashing their weekly paycheck at the bar. Our ancestors didn't get divorced for the simple reason that it was so expensive. And yes, this means many people stayed in bad or abusive relationships, simply because they could not afford to get out.

But today? Leave the toilet seat up once, and its out-the-door, mister! I am being facetious, of course. But it does seem that the reasons people get divorced today are often trivial. Well, let me restate that, not trivial - as the reasons generally relate to money - but preventable.

Do you and your spouse have a financial plan? What are your goals in life? When do you want to retire and what do you want to do when that happens? Do you have a budget for spending? Are your assets truly co-mingled, ordo you still play "My money, their money"? It is sad to me, but I meet folks all the time - married for decades - who have no plan in place. When they retire, they have absolutely no idea what to do, or how they are going to afford it.

Just some thoughts. It is better to sit down and talk about money than to stand up and argue about it.